Reconstruction and the art of the possible.

• Author: Kiep, Walther Leisler
• Position: American participation in development and investments in Eastern Europe - Chairman's Agenda: Acquiring in Eastern Europe

Just as the U.S. committed itself to Western Europe at the end of the 1940s, so too must it now invest in the future potential of Eastern Europe.

The political changes in the Soviet Union, and in almost all the East Bloc countries, have opened up new prospects of cooperation for the 1990s. In particular, they have demonstrated the close correlation between political and economic development. Political liberalization will not be successful unless these national economies can increasingly integrate themselves in the world economy.

The radical changes initiated by Soviet President Mikhail Gorbachev have mercilessly exposed the weaknesses of the Eastern economic system. The system of a planned economy has resulted in structures that are not competitive on an international level. Consumer supply was considered a marginal parameter of planning. The production of capital goods was mainly devoted to the oversized military aspect of economic planning. International exchange relationships were bilateral and were based largely on barter trade.

Against this background it is not surprising that the share of goods exchange of European COMECON (Council for Mutual Economic Assistance) countries in the total foreign trade of OECD (Organization for Economic Cooperation and Development) countries, which was still 4.1% in 1975, had dropped to only 2.4% by 1988 and has been stagnating at this low level ever since. This means that East-West trade accounts for only about 40% of the goods exchanged between the OECD countries and the four advanced, newly developed countries of Southeast Asia (Singapore, Hong Kong, Taiwan, South Korea).

The low quality of economic relationships is not without political risks for Western countries. However, the transition of a planned economy that has existed for decades to a free market economy has not so far been analyzed either as a practical or theoretical problem. The West is now being confronted with a totally new situation, which is being aggravated by the fact that, in the individual countries of the Eastern Bloc, there are varying starting conditions and differing development processes.

There are frequent calls for transition to take place in one go, if possible, because mixed economic systems in general create additional problems. In the social reality of the European COMECON countries, however, transition can only be achieved in stages. The speed, extent, and order of stages will have to be found by a process of trial and...